If you’re like many people, you may have included improving your finances among your resolutions for the new year. Your goals may focus on paying down debt, saving for a large purchase, planning for retirement, or something else you are working toward.
Here are some practical tips you can use to set and reach your financial goals in 2021.
Evaluate How the Past Year Impacted Your Finances
The first step in making an effective plan for the new year is evaluating how you did the previous year.
- Did you make any financial resolutions, such as paying off debt or improving your credit? If so, did you reach them?
- Did you achieve any financial goals that you set for yourself?
- Do you have more or less debt than when you started the year?
- Do you have more or less savings than when you started?
- Has your credit score increased or decreased?
The answers to these questions may help you assess your progress over the past year and tailor your strategy for the new year.
Review Your Accounts
Conduct a review of your checking and savings accounts, credit card accounts, and any investment accounts, such as your Thrift Savings Plan.
- How many fees did you pay on your accounts?
- Did you ever overdraft on your checking account? If so, how many times?
- How much money did you earn on your savings account and investments?
Looking at fees and earnings can help you determine if your current banking services are meeting your needs. If you paid high fees on your checking account, for example, you might want an account with low or no fees. If you overdraft often, then you might be better with an account that offers overdraft protection.
On the flipside, if you didn’t enjoy healthy earnings this past year on your savings, it might be time to consider investments. You may need to set a goal for 2021 to consider cash equivalents that offer better rates than your basic savings accounts. (Cash equivalents are investments that offer higher rates of return than basic savings, such as CDs.)
You may also want to look at your insurance policies and ascertain they have provided the coverage you need. You can also assess if you’ve overpaid and purchased more coverage than you need.
Set a Budget—and Stick to It
The Consumer Financial Protection Bureau (CFPB) has developed tools to help make budgeting work for you.
- The spending tracker is a great way to start looking at where your money is going and spot spending trends. As you list your spending over a few weeks, you may identify potential cost savings— such as eating take-out or at restaurants less frequently or a subscription you rarely use.
- Next, try filling out a cash-flow budget. This weekly tool helps you assess your income and expenses to ensure you have enough to cover your bills, put aside money for savings goals, or other things you want and need.
Deal with Debt
Dealing with debt is a reality for many adults at some point in their lives—whether paying off student loans, a mortgage, or other bills. The new year is a time where you can decide to get a handle on your debt and make positive progress. If you’ve fallen behind on some payments, there are steps you can take to get back on track. If you have a debt in collection and debt collectors are contacting you, we also have resources to help you decide how to respond. While it may be tempting to avoid the issue, you can save yourself stress and more problems in the long run by taking control.
- Behind on bills? Here are three steps to help you make tough choices in tight moments.
- The CFPB provides debt collection resources to help you understand how debt collection works and what your rights are.
Your Employee Assistance Program is Here to Help
DHS cares about your financial health and has resources in place to help. Your Component EAP can provide financial and legal consultation services or refer you to a screened financial counselor who can help you set your budget over a no-cost initial financial consultation call.